AT&T has reached an $850 million deal to sell 74 of its Central Offices (COs) to private real estate developer Reign Capital, marking a strategic shift as the company continues to modernize its network. This sale-leaseback transaction involves over 13 million square feet of real estate across the U.S., as AT&T gradually phases out its legacy copper network infrastructure in favor of fiber and wireless technologies.
What Is a Sale-Leaseback Deal?
In a sale-leaseback transaction, AT&T sells its assets, in this case, its underutilized COs, to a third party but retains operational control over the space it still needs. The agreement allows AT&T to free up cash upfront while maintaining the ability to continue operating the facilities necessary for its ongoing network services. The company will also lease back only the space it needs, streamlining its real estate footprint.
The Shift from Copper to Fiber and Wireless
The sale of these Central Offices comes as AT&T accelerates its transition from copper-based networks to fiber and wireless solutions. With the reduction in the need for copper network equipment, many of the COs have become less essential for operations, prompting the telco to rethink their use. The company aims to retire its copper network by 2029, and this sale-leaseback deal helps AT&T manage its underutilized properties while advancing its broader fiber rollout.
Breakdown of the Deal and Properties Involved
The deal involves 74 CO properties spread across the U.S., although specific details on all of them have not been disclosed. However, reports confirm significant transactions, such as the sale of the Michigan Bell building in Grand Rapids for $18.8 million and the 725 13th St. NW in Washington D.C. for $112 million. The total area covered by these properties exceeds 13 million square feet.
According to Michael Ford, head of global real estate at AT&T, the deal represents a “creative solution” that unlocks value from real estate that might otherwise remain underutilized. It also reflects AT&T’s efforts to streamline its footprint while generating both short-term and long-term value through a revenue-sharing model with Reign Capital.
AT&T’s Strategy for Streamlining Real Estate Assets
AT&T’s decision to lease back only the spaces necessary for its network infrastructure highlights a key element of the company’s strategy to reduce its real estate footprint. This move ensures that AT&T can continue accessing the essential infrastructure while optimizing its real estate portfolio for future developments. The telco retains exclusive control over the operations and maintenance of network assets within each location, ensuring continuity in its services.
Provisions for Redevelopment and Future Transactions
Though the specifics of redevelopment plans for the sites were not disclosed, AT&T’s agreement with Reign Capital includes provisions for financial participation in redevelopment revenues. The telco also retains the final say on any redevelopment plans, ensuring that its network operations remain uninterrupted.
AT&T’s latest deal with Reign Capital follows a similar transaction in 2021, in which the company sold 13 properties, generating $300 million in upfront cash. AT&T has indicated that the structure of this recent deal may serve as a model for future transactions involving its legacy infrastructure.
Industry Trends: Telecom Carriers and Copper Infrastructure
AT&T is not alone in evaluating the future of its copper-centric infrastructure. Other carriers, including Ziply and Frontier, have explored ways to repurpose or sell their Central Offices. Ziply, for example, is converting around 200 old COs into colocation data centers as part of its fiber rollout, while Frontier also offers colocation services from legacy sites. These trends reflect a broader shift in the telecom industry as companies seek to modernize and adapt their infrastructures to meet the growing demand for fiber and data center solutions.
FAQ Section
1. What is a sale-leaseback transaction, and how does it benefit AT&T?
A sale-leaseback is a financial arrangement where a company sells its assets and then leases them back for continued use. For AT&T, this deal provides an immediate cash infusion while allowing the company to retain control over the spaces needed for its network operations.
2. Why is AT&T moving away from its copper network?
AT&T is shifting from copper to fiber and wireless technologies to improve network efficiency, speed, and scalability. Fiber networks offer greater capacity and faster speeds, which are essential for modern communication needs.
3. What are the potential plans for redeveloping the Central Offices AT&T sold?
While specific redevelopment plans have not been revealed, AT&T has a stake in the redevelopment revenues. The company will have final approval over any plans to repurpose the properties, ensuring its network operations are not disrupted.
4. How will the sale-leaseback deal impact AT&T’s real estate portfolio?
The sale-leaseback transaction allows AT&T to streamline its real estate holdings by reducing the number of properties it owns, while still maintaining the necessary space for network operations. This shift helps AT&T focus on its fiber and wireless network expansion.
5. How does AT&T’s deal compare to similar deals in the telecom industry?
AT&T’s sale-leaseback agreement is in line with broader industry trends, where telecom carriers, such as Ziply and Frontier, are repurposing or selling their legacy copper infrastructure in favor of fiber networks and data center facilities.
